A day of reckoning for “disparate impact” housing discrimination cases

Next Wednesday, the Supreme Court will hear oral argument in a Texas case in which the issue is whether claims of “disparate impact discrimination” can be brought under the Fair Housing Act. The case is Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc.

“Disparate impact discrimination” occurs when a policy disproportionately excludes or injures a particular group and the policy is not shown to be justified by legitimate interests. Under disparate impact theory, the policy is illegal regardless of whether it was intended to discriminate.

I’ve described “disparate impact” theory as the left’s most potent weapon in the war on standards. Activists use the theory to attack, say, school disciplinary standards or the use of employment standards on the theory that these policies disproportionately burden Blacks. Typically, the remedy they seek is the discarding or relaxation of the standard.

The real goal of this campaign is to impose a de facto quota regime in which benefits are doled out and burdens imposed equally to Blacks and Whites (for example). In this regime, merit will take a back seat to race and ethnicity.

Disparate impact theory is well-entrenched in some areas of the law, most notably employment discrimination. But the Supreme Court has yet to say whether it applies in housing discrimination cases under the Federal Housing Act.

The Obama administration has done everything it can, short of abandoning the theory, to prevent the Supreme Court from deciding the issue. Indeed, in two cases, it in essence bought off the opposing parties to thwart Supreme Court review. In one of the cases, discussed here, the Holder Justice Department (and specifically Tom Perez, who is now Secretary of Labor) went so far as to give up a valuable monetary claim against the City of St. Paul in exchange for the City’s agreement to drop a case in which the Supreme Court was set to decide whether disparate impact claims can be brought under the FHA.

Why the desperation? Because (1) the application of disparate impact theory to housing law is an important component of the left’s efforts to tell Americans where to live and (2) the administration is deeply concerned that the Supreme Court as presently composed won’t buy the theory.

Although we should never underestimate the resourcefulness of the Holder Justice Department, the State of Texas seems unlikely to withdraw its appeal. Therefore, the day of reckoning for disparate impact theory under the FHA looks to be arriving.

How should the Supreme Court resolve the issue? I agree with Han von Spakovsky and Elizabeth Slattery that the FHA does not allow disparate impact discrimination claims. As they explain, the FHA prohibits making housing (or specific real-estate terms or conditions) unavailable to an individual “because of race” or “based on race.”

This language makes it clear that only intentionally discriminatory conduct — disparate treatment — violates the law. You must have acted because of the victim’s race.

This straightforward reading is reinforced by the fact that the portion of the FHA that imposes criminal sentences for certain violations uses the same “because of race” language. Von Spakovsky and Slattery note that criminal penalties ordinarily cannot be imposed without intentional, knowing conduct, and that criminal prosecutions under the FHA cannot be established through disparate impact analysis.

It would make no sense to conclude that the “because of race” language in the criminal portions of the FHA means one thing (intentional discrimination only), but the same language in different part of the Act means something else (intentional or unintentional discrimination).

My friend Jim Scanlan, in an amicus brief, has raised a constitutional argument against applying disparate impact theory in FHA cases. He contends that, because of statistical problems that arise in defining disparate impact, the concept is unconstitutionally vague, at least in the absence of sound guidance from the government as to how to measure impact.

Jim relies on his critique of how disparate impact is measured — a critique I have written about here and here.

Jim’s amicus brief to the Supreme Court is here. He points out, among other things, that for more than two decades federal regulators have encouraged lenders to relax lending standards in the mistaken believing that relaxing lending standards will tend to reduce relative differences in adverse borrower outcomes.

The statistical concepts Jim relies on apply to disparate impact cases beyond just those brought under the FHA. They apply, for example, to Title VII disparate cases.

Thus, although the Supreme Court need not reach Jim’s constitutional argument in the FHA case — it can simply rule that the FHA doesn’t authorize a disparate impact claim — the constitutional argument Jim raises provides a basis for attacking disparate impact claims even in areas like employment discrimination, where such claims are authorized by statute.

I’m looking forward to the oral argument in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc., and will try to give readers a sense of how it goes.

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